Pensions as a portfolio problem: fixed contribution rates vs. fixed replacement rates reconsidered

Pay-as-you-go (PAYG) pension schemes can contribute to better intergenerational risk-sharing and diversification. However, different variants of PAYG schemes entail different properties in these respects. In a stochastic 2-OLG model we compare PAYG schemes with fixed contribution rates and such with fixed replacement rates. The literature has shown that the former are preferable to the later from an ex ante perspective. We derive the opposite result for the ex post perspective. Here, schemes with fixed replacement rates are unambiguously preferable: they enhance intergenerational risk-sharing, lead to a higher savings and higher utility levels. We further show that, from an ex ante (veil-of-ignorance), perspective both schemes are non-comparable if the effect that fixed-replacement schemes serve as an insurance device for old-age income is properly accounted for. Received: 7 December 2000/Accepted: 17 May 2001     

Public pensions in transition

The main purpose of this paper is to analyze problems of financing an old-age insurance when birth rates are low and population declines or fertility fluctuates with time. A government then searches for optimal policies to cope with such problems. A first criterion could be seen in the Pareto principle. But we all know that there is no way out of PAYG unless at least one generation has to pay for the transition. Therefore an optimal policy is concerned with intergenerational redistribution and optimal growth.In the absence of public pensions the economy will in the long run converge to a steady state which is not optimal in the sense of a golden rule. This dynamic in-efficiency results from the decentralized decision making by the consumers and the firms. If the PAYG system influences the savings ratio of the economy, public pensions can be seen as an instrument to implement a modified golden rule.Paper presented at the ISPE-conference on The Fiscal Implications of an Ageing Population, Vaalsbroek, The Netherlands, May 30–June 1, 1990. I am obliged to Dieter Bös, Friedrich Breyer, Christian Keuschnigg, Wolfgang Kitterer, and an anonymous referee for helpful comments on an earlier draft of this paper. Financial support through Deutsche Forschungsgemeinschaft, SFB 303 is gratefully acknowledged.     

On social security financial crisis

We indicate that financial crisis in social security programs might be endogenous because social security affects fertility and human capital's decisions and thus, the aggregate growth rate of the economy. These effects lead to an endogenous erosion of the financial basis of the PAYG social security program so that, as a consequence, the PAYG system is not sustainable and it requires continuous increases in the social security tax rate. I received helpful comments in an earlier version of this paper from G.S. Becker, Larry Sjaastad, two anonymous referees and participants at seminars at Pontificia Universidad Catolica de Chile and The University of Chicago. Remaining errors are my own responsibility. Responsible editor: Junsen Zhang.     

Effects on pregnancy outcomes of changes in the North Carolina State Abortion Fund

Extending work of Cook et al. (1999, 1996), this paper examines abortion funding cutoffs for poor women in North Carolina, a unique setting allowing for a strong quasi-experimental design. Using vital registration data and additional administrative data from North Carolina, we decompose program effects on the abortion/birth ratio into two components: coverage (i.e., the proportion of all abortions that are state funded) and substitutability (the proportion of state funded abortions that would have been births in the absence of the state program). We show that both components are crucial for understanding the effects of fund cutoffs and that both components vary by age and by race. We offer explanations for these differences. Overall, we conclude that: the North Carolina State Abortion Fund (SAF) had powerful and pervasive effects: i.e., the SAF cutoffs reduced abortions and increased births.     

新古典增长理论框架下的老龄化效应分析

众所周知,日益严重的老龄化进程将对一国经济和社会各个方面的产生深远影响。近年来,以OECD和亚洲国家为对象的定量研究大量涌现。着重于分析人口老龄化对中国宏观经济变量的影响,本文考察了现收现付制和取消现收现付制两种不同条件下的政策模拟。运用Ayse Imrohoroglu等人的新古典增长模型,我们的政策模拟基于两种不同的人口冲击:生育率降低、预期寿命延长。我们发现在上述政策模拟中,个体变量和汇总变量的变化各不相同。     

中国养老保险隐性债务显性化研究

养老保险隐性债务是现收现付制养老金制度的固有特征;养老保险隐性债务的显性化问题是源于现收现付制养老保险向基金制的转轨。养老保险制度的转轨成本源于隐性债务,但在量上并不等于隐性债务,只有在制度转轨过程中显性化出来的那部分隐性债务才是转轨成本。中国养老保险制度改革的目标是部分基金制,因而只是部分旧制度下的隐性债务会显性化。隐性债务的显性化是一个复杂的动态变化过程,作者用系统动力学的方法进行模拟测算,得出中国未来各期的政府清偿隐性债务的估测量值,以供决策部门参考。     

Altruism and international labour migration

This paper investigates the effect of altruism on the pattern of labour migration in a two-country overlapping generations model. We show that differences in degrees of altruism across countries lead to bilateral migration flows. Starting from the autarkic steady-state equilibrium, restrictions on labour migration are relaxed. In temporary post-migration equilibrium factor prices are equal across countries. We then characterize the unique stable steady-state equilibrium: both countries are populated and this equilibrium is not a Pareto improvement. Some individuals prefer to live in autarky, others in an integrated world economy. Received: 6 July 1998/Accepted: 11 February 1999     

Aging, fertility, social security and political equilibrium

We analyze the effect of population aging on the political choice of the size of a pay-as-you-go (PAYG) social security system, incorporating the heterogeneity of individuals in their preference for having children, and hence the endogenous fertility choices of individuals, into a simple overlapping generations model. We show that population aging may result in an increase in the contribution rate, increasing the share of the retired population who prefer a higher contribution rate; and that, if the system involves redistribution between retirees with different contributions, the increased contribution rate raises the number of individuals who have children, i.e., future contributors.     

Persistence of a fig wasp population and evolution of dioecy in figs: a simulation study

The relationship between fig trees and their pollinator wasps is a well-known example of species-specific obligate mutualism. In this article we present a stochastic model of this mutualistic system, referring to data on a dioecious fig (Ficus schwarzii) in Borneo, and examine the conditions for the persistence of a wasp population for a given period. (1) When the average duration of the flowering interval of fig trees is short, even a small fig population can sustain a wasp population successfully. A population whose average period of flowering cycle is half that of another population can sustain a wasp population with a number of trees less than half of the other population. (2) The wasp survival rate (WSR) is higher when (a) the variation of the interval periods of fig flowering is smaller, (b) the fig population size is larger, and (c) figs can prolong their receptivity to wait for a wasp if no wasps are available. (3) WSR is predictable from the average proportion of the fig's receptive phases, in which wasps are available, to their total receptive phases. (4) The persistence period of a wasp population increases exponentially with the number of fig trees. Based on these results we propose a new hypothesis, as a possible scenario, on the evolution of dioecy from monoecy in Ficus. Received: November 13, 1998 / Accepted: July 14, 1999     

Inheritance, land, and capital mobility linked to labour mobility

This paper presents a two-country migration model, following Galor (1986), in which the world population consists of two types individuals. Individuals with a high (low) degree of altruism give to their children a high (low) level of bequest. Production uses three inputs: immobile land, mobile labour, and capital. Capital mobility is linked to labour mobility since individuals move with their inheritance. The model shows that countries are homothetic in the post-migration equilibrium with equal factor prices and equal densities of population. Migration flows are bilateral and the number of each type of migrants is uniquely determined. In some cases, migration leads to a Pareto improvement in both countries. Received: 8 July 1999/Accepted: 7 April 2000     

养老保险基金模式选择的人口学分析

从人口学角度看,养老保险基金的两种基本模式——现收现付制和基金制分别表现为时期平衡和队列平衡。退休者的生活消费均来源于在职职工创造的财富,因此,不仅现收现付制,而且基金制养老保险也体现了代际之间的再分配关系。人口老龄化、劳动力人口数量、人口素质和人口迁移是影响养老保险基金模式选择的主要人口因素。我们要综合考虑人口因素和经济因素来选择我国的养老保险基金模式。     

Fertility, child care outside the home, and pay-as-you-go social security

We examine the long-run effects of the pay-as-you-go (PAYG) social security scheme on fertility and welfare of individuals in an overlapping generations model, assuming that child-care services are available in the market. We show that the impact of a tax increase on fertility depends on the relative magnitudes of the standard intergenerational redistribution effect through the social security system, the (implicit) subsidy effect through tax-exemption of child rearing at home, and the price effect through changes in the relative price of market child care, and that if parental child-rearing time is inelastic, a tax cut could bring about a Pareto-improving allocation.

Homebirth, freebirth and doulas: casualty and consequences of a broken maternity system

In Australia private homebirth remains unfunded and uninsured and publicly funded homebirth models are not widely available. Doulas are increasingly hired by women for support during childbirth and freebirth (birth intentionally unattended by a health professional) appears to be on the rise. The recently released Improving Maternity Services in Australia--The Report of the Maternity Services Review (MSR) exclude homebirth from the funding and insurance reforms proposed. Drawing on recent research we argue that homebirth has become a casualty of a broken maternity system. The recent rise in the numbers of women employing doulas and choosing to birth at home unattended by any health professional, we argue, is in part a consequence of not adequately meeting the needs of women for continuity of midwifery care and non-medicalised birthing options.     

Transitions from Temporary to Permanent Work in Canada: Who Makes the Transition and Why?

The focus of this paper is on a microeconomic analysis of the annual transition rate from temporary to permanent work of individual workers in Canada for the period 1999–2004. Given that a large proportion of temporary employment is involuntary, an understanding of the factors associated with the transition to permanent work may inform public policy. Factors associated with the transition, namely, human capital, household structures and labour market segmentation are analyzed using data from the Statistics Canada’s Survey of Labour and Income Dynamics (SLID) for the period 1999–2004, limited to paid workers aged 20–64 years, excluding students. Among the key factors associated with the transitions are younger age and low unemployment rates. The analysis adds to the Canadian and international literature on transitions from temporary to permanent work.

Occupational risks, social insurance and investments in education

A link between social insurance and education policy is explored. Due to moral hazard full insurance against disability is not feasible. When high- and low-risk individuals can be identified second-best social insurance system entails cross-subsidies from the low-risk group to the high-risk group. Implementation of this second-best insurance however distorts the human capital investment decisions when education qualifies for a low risk job. Therefore, the second-best social insurance together with an education subsidy is a welfare improving policy. An education policy also has the role of establishing dynamic consistency of the government's policy. Received: 16 October 1998/Accepted: 8 September 1999     

Strong,healthy, energized: Striving for a healthy weight in an older lesbian population

The Office on Women’s Health funded five pilot healthy weight intervention studies for lesbian and bisexual (LB) women, which included a program called Strong. Healthy. Energized (SHE). SHE was a 12-session program, targeted toward LB women age 60 and older, which focused on exercise, including a pedometer to track steps; nutrition; stress management; and group discussions. The program enrolled 39 participants. Waist circumference decreased by 3.7% across the group (p < .01). Participants with the lowest one-third baseline step count saw a marked step increase. This intervention was effective in improving health behaviors and short-term health outcomes for older LB women.     

Poland on the dole: The effect of reducing the unemployment benefit entitlement period during transition

We analyse the unemployment benefit regime change that occurred in Poland in December 1991 using data from the Polish Labour Force Survey. Before December 1991, the entitlement period to unemployment benefits was unlimited. Thereafter, it was reduced to 12 months (with a few exceptions). Using the difference-in-differences approach within a hazard rate framework, we find that the regime change did not have a significant effect on the duration of unemployment. The results thus give credence to the view that the unlimited entitlement period of the old unemployment benefit regime was not the main culprit for the long durations of unemployment in Poland, although the generous eligibility criteria may have contributed to the increase in the incidence of registered unemployment at the beginning of the transition process. Received: 21 May 1997/Accepted: 15 March 1999     

Pension reform, employment by age, and long-run growth

We study the effects of pension reform on hours worked by three active generations, education of the young, the retirement decision of older workers, and aggregate growth in a four-period OLG model. The model explains important facts well for many OECD countries. Our simulation results prefer an intelligent pay-as-you-go system above a fully funded private system. Positive effects on employment and growth are the strongest when the pay-as-you-go system includes a tight link between individual labor income and the pension, and when it attaches a high weight to labor income earned as an older worker to compute the pension assessment base.     

The Council of Economic Advisers on Work and Retirement Among the Elderly

The 1999 Annual Report of the US council of Economic Advisers (a document of some 450 pages, formally an Annex to the Economic Report of the President Transmitted to the Congress February 1999, Washington, DC: US Government Printing Office) addresses some of the questions an aging population raises for the American economy. (Aspects of this topic were also discussed in earlier Council reports; see the Documents section of the March 1996 and June 1997 issues of PDR.) Chapter 4 of the 1999 report is titled “Work, Retirement, and the Economic Well-Being of the Elderly.” The excerpts from this chapter reproduced below provide a summary of the expected future changes in the age distribution of the US population—a result of improving life expectancy and low fertility—and the concomitant marked changes that will characterize the racial and ethnic composition of the elderly. The report notes recent declines in the rate of disability among persons aged 65 and older and discusses changing patterns of retirement and their causes. Despite long-term improvements in health and longevity, the retirement age has fallen rather than risen during the twentieth century. The report suggests, however, that this trend has now run its course, as influenced by the increasing dominance of physically less demanding service-sector jobs, more flexible work schedules (including availability of part-time employment), and changes in persion arrangements.     

Intergenerational redistribution in a small open economy with endogenous fertility

For pay-as-you-go financed pension systems, claims may be calculated according to individual contributions (income) or the number of children of a family. We analyse the optimal structure of these parameters in a model with endogenous fertility. It is shown that for both structural determinants there exists no interior solution of the problem of intragenerational utility maximisation. Thus, pure systems are always welfare maximizing. Furthermore, children-related pension claims induce a fiscal externality that tends to be positive. The determination of the optimal contribution rate shows that the widely accepted Aaron-condition is in general a misleading indicator for the comparison of fully funded and pay-as-you-go financed pension systems. Received March 12, 1996 / Accepted January 27, 1997